Tuesday 27 April 2010

Beach towels on sun loungers

Regarding this week's Fun Online Poll, I've had a few comments claiming that land can be owned in the absence of a state, but what they boil down to is just replacing the existing structure of government with a different one, i.e. by using a private army etc.

The point that other goods and services can be traded, i.e. owned, in the complete absence of 'a state' (and even where ownership of those goods or those activities are 'illegal') is a red herring. This does not support the argument that land ownership can exist in the absence of the state, it illustrates exactly the opposite. In olden times when countries used to fight wars over provinces, if the enemy army was coming (and likely to win), you could flee and take yourself, your skills and physical possessions with you. But the land that you owned under the protection of 'your' government is forfeit; 'your' government is replaced by the other army's government and they are then in charge of saying who owns the land.

Just for clarification, the 'state' has nothing to do with 'Big Government', 'the state' is just large numbers of people in a geographically defined area agreeing to abide by common rules and accepting that there will be some coercion at the very margins to enforce these broadly accepted rules.

At one extreme, the council will send bulldozers to demolish a house built without the correct planning permission, or the police will physically remove squatters; but coercion can be as little as suffering 'the mild disapproval of those around you', for example, I'm not aware that there is a written law anywhere saying whoever gets up at the crack of dawn to put their towels on the sun loungers in the best position can then go back to bed, have breakfast etc. and return to the pool and sit down where the towels were, it's just the way it is.

Very few people have the nerve to take those towels, chuck them in the swimming pool and plonk themselves down, it's just not the done thing (as tempting as it might be). Fair do's, but with sun loungers it is 'occupation' rather than 'ownership', and whoever wants the best ones has to pay a price every day (i.e. getting up a lot earlier) and those who are prepared to make do with the ones in not such good positions have the benefit of a nice lie in.

Having a 'freehold', to continue the analogy, would be like allowing the first guest who puts a beach towel down on a particular sun lounger when the hotel first opens, to claim rights to that sun lounger in perpetuity, regardless of whether that guest is still actually paying his daily room rent to the hotel, and for the 'owner' of that sun lounger to be allowed to rent his sun lounger to future hotel guests (who will still have to pay the room rent to the hotel owner, of course), or even to sell his 'freehold' on the sun lounger to other people ('investors') and to pocket the whole proceeds without the hotel, who built the swimming pool etc, getting any share of the proceeds.

Just sayin', is all.

11 comments:

View from the Solent said...

Mark,
I was nodding my head until your last para. Not too sure about this (yes, I know analogies can be slippery)
The state didn't create the land (sun lounger) in the first place. Unless it's the Dutch state ...

And the freehold only exists until the state decides otherwise (or another state comes along and confiscates it).

James Higham said...

By that logic, Mark, when I "buy" a car and finish paying it off, it then reverts to the State because I've ceased paying.

Mark Wadsworth said...

JH, please don't resort to the "Land Value Taxers say that everything belongs to the state" nonsense. Cars are not like land. A car itself would never be subject to land value tax. Nobody has ever said they should be.

Contrast the following:

1. A car is the result of the free exchange of goods and services between people.

2. It was physically created by somebody and somebody else paid for it.

3. Cars depreciate over time. The value of a car depend on how well built it is and how old it is.

4. Neither the owners of, nor the manufacturers of cars have any state-sanctioned monopoly. There are no bubbles in car prices because of political manipulation.

With the following:

1. Land ownership is a result of a state-protected monopoly. Land ownership only exists under the umbrella of 'the state'.

2. The land itself was not physically created by anybody and land values are 99% created by the actions of 'society in general'. Yet whichever member of 'society in general' wants to occupy land has to pay a privately collected tax to the current owner.

3. Land values tend to rise slightly faster than economic growth over time. The value of land depends purely on its location and what planning permission it has.

4. The supply of land for residential or business use is severely constricted by planning laws. The income accruing to land-ownership cannot be competed away.

Politicians create massive bubbles in land values to create the illusion of wealth and/or to line the pockets of their chums the bankers (delete according to cynicism).

View from the Solent said...

Thanks for the reply Mark. I need to think about that.
(I've only been considereing economics for a couple of years. Only got as far as "Sentiments", "Wealth", Bastiat, and Ricardo so far. And am still asssimilating that. Amongst much else. So much to think about, so little time ..)

subrosa said...

Thanks Mark. I've learned something from this.

bayard said...

"The income accruing to land-ownership cannot be competed away."

It can, and you want it to be thus: Planning controls restrict the supply of housing land. That restriction of supply forces up prices. High prices lead to high income accruing to the owner of such land when they sell or rent. Removing the restriction increases supply. Increased supply with fixed demand reduces prices. Reduced prices leads to reduced income as the buyer has more choice. For example, if I have the only house within walking distance of a popular beach, I can charge a much higher rent for it than if a hundred others were built nearby and offered for rent.

Mark Wadsworth said...

VFTS, if you only get as far as Ricardo's Law of Comparative Advantage; Ricardo's Law of Rent and Ricardian Equivalence (which was later disputed by the great man himself) then that is more than half of what you need to know.

S, thanks. The question is, what?

B, yes, to some extent. But...

a) Land near Hyde Park will, for the foreseeable future, always be worth ten thousand* times more than land in the middle of the countryside even if there were no planning restrictions on either.

* That is not an exaggeration - the most expensive land ever bought was £60 million/acre (Candy Brothers) and farmland in the UK goes for about £6,000 an acre.

b) If planning laws were liberalised, then the total rental value of all land would probably go up. Compare: if a town, which has hitherto only issued 100 taxi driver licences, then opens up the taxi market to all comers, would the total income of all taxi drivers go up or down?

Anonymous said...

Just for clarification, the 'state' has nothing to do with 'Big Government', 'the state' is just large numbers of people in a geographically defined area agreeing to abide by common rules and accepting that there will be some coercion at the very margins to enforce these broadly accepted rules.

No. The creation of the institutions of coercion makes the state. Agreeing common rules may be a necessary step but it is insufficient on its own.

Mark Wadsworth said...

Anon, that depends what you call "an institution". There is, allegedly, a village in India where no crime has ever happened, they are scrupulously honest and non-violent. It is about as far removed from anarchy as you can imagine, but it is still very much 'a state' or part thereof.

If somebody in that village is tempted to commit a crime, then they must know that at least they will be shunned by the other villagers, and if the crime is serious enough, the other villagers will carry out vigilante justice or appoint somebody to investigate and punish it.

England managed perfectly well in Anglo-Saxon times exactly along these lines, there was no formal police force. But there was still a respect for exclusive occupation of land and every occupant had to pay the commensurate ground rent into the pot (i.e. the King collected it and bodged along as best he could).

Anonymous said...

The institutions are any that are used to coerce. That might include any or all of police, courts, social workers, teachers, inspectors etc etc.

Coincidentally Ian B discusses the difference between minarchy and anarcho capitalism here, which has some relevance to this idea.

My basic philosophical objection to your statement is that voluntary interactions between consenting adults does not a state make. If it did then anarchy in the sense of the community desired by anarchists (rather than the state of chaos) would be a state.

Also worth noting is that the end result of communism is claimed to be a withering away of the state. Now the thesis is nonsense, of course, but not because they didn't understand what constituted a state.

Apols for "anon" whilst at work

Mark Wadsworth said...

Anon, OK, let me rephrase the question in your terms:

"Is land ownership possible if it is only underpinned by voluntary agreements between consenting adults; in the complete absence of any credible threat or punishment for trespass; in the complete absence of any planning restrictions; and in the complete absence of an army to defend the country against outsiders?"

If we apply the same question to physical goods or personal skills and free exchange thereof, then the answer is quite clearly 'yes', but that is not the question I am asking.